May 6, 2020
Every April we patiently look for the first signs of spring in the air -- leaves budding, birds singing, bulbs blooming. This year, we also looked for signs of an economic apocalypse.
I’m exaggerating -- a little. April marks the beginning of corporate earnings season, and this new cycle would be like no other with the outbreak of the COVID-19 pandemic. Economic lockdowns in the United States began in mid-March, toward the end of the first quarter. Wide swaths of the economy were decimated, sending stock prices plummeting and leaving millions out of work.
Anecdotal evidence suggested that technology industries were holding up well, but institutional and individual investors and the public wanted to see evidence. While quarterly earnings news releases from publicly traded companies are a good source of information, they often only tell part of the story.
Investors, financial analysts and media also rely on conference calls to hear management unpack details in financial statements and comment on operating performance. Conference calls can be a dry recap of financial results and less-than-candid commentary, but some companies also use them as an extension of brand storytelling.
After reviewing several calls over the past few weeks, here are five takeaways on how tech companies are navigating the public health and economic crises:
- Get Me Rewrite! Earnings calls typically start with a presentation and discussion of financial results by the CEO and CFO. The presentations are scripted and generally come off as an infomercial for the company. But this time around, traditional scripts were scrapped like so much of our daily routines pre-COVID-19. CEO cheerleading was replaced by a more somber, humble tone reflective of the challenging times, even if results were stellar.
After a brief recap of what Intel’s CEO, Bob Swan, called an “outstanding” first quarter, he pivoted to talk about COVID-19 for several minutes: praising employees and vendors, reviewing standards at factories and highlighting how the company is helping the community.
- CSR During COVID-19: Speaking of community, companies recognize the importance of having a social purpose woven into core business. They now have a chance to make good on values-driven commitments, and some are making note of their social contributions during conference calls.
Verizon is waiving late fees and overage charges for customers, and has partnered with the New York Times to offer the newspaper’s content for free to high school students. IBM created a COVID-19 button on its Weather Channel app that allows users to track confirmed cases and deaths by county. Honeywell shifted manufacturing at two chemical plants to produce and donate hand sanitizer to government agencies.
- Employee Appreciation Day/s: The shout-outs to employees were everywhere. Some went beyond praise to offer financial support and more sick time. For some, the pandemic has highlighted the need to create safer working conditions and more loyalty through higher pay and other benefits.
Amazon said that it will spend “hundreds of millions of dollars” developing testing capabilities for all of its employees for COVID-19, starting with front-line workers; personal protective equipment for the company’s hundreds of thousands of employees; “enhanced cleaning” of its facilities; and “higher wages for hourly teams.”
CEO Jeff Bezos bluntly told investors that they will have to take a backseat for employees for the time being.
- ¯\_(?)_/¯ Although investors hate uncertainty, CEOs are not afraid to express some fear and doubt about the future. “Everyone is wrestling with the implications, on health, on hunger, poverty,” said Reed Hastings, CEO of Netflix. “And we, too, are really unsure of what the future brings.” The honesty is refreshing but also necessary because visibility is limited like a dense fog on a San Francisco morning.
The lack of visibility led Apple and several other companies to withdraw profit and revenue guidance in future quarters, predictions that analysts and investors have relied on. The fact is no one knows what’s coming, even Apple.
- Digital Transformation on Steroids: Tech companies have always been known, and criticized, for their unbridled optimism. But the pandemic has underscored tech’s role in keeping the world together when we’re apart. Technology has allowed the shift to remote work and schooling, and made staying indoors easier. Some companies have had to reinvent themselves in a matter of weeks. Or as Microsoft Satya Nadella said, “We have seen two years’ worth of digital transformation in two months.”
Of course, tech CEOs didn’t waste the opportunity to plug their own products and services because that’s what investors want to hear. IBM’s Arvind Krishna: “The last few weeks have only reinforced the need for clients to modernize their businesses for the new world, and cloud and AI are at the core of their digital reinventions.”
Intel’s Swan went as far as envisioning how technology could prevent the next viral outbreak: “COVID-19 has only reinforced how important it is for Intel and our customers to accelerate the power of data to fight the current pandemic and avert the next one.”
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